Three Days Left To Buy Asia Pile Holdings Corporation (TSE:5288) Before The Ex-Dividend Date

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Asia Pile Holdings Corporation (TSE:5288) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Asia Pile Holdings investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 8th of December.

The company's next dividend payment will be JP¥24.00 per share. Last year, in total, the company distributed JP¥48.00 to shareholders. Looking at the last 12 months of distributions, Asia Pile Holdings has a trailing yield of approximately 3.9% on its current stock price of JP¥1238.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Asia Pile Holdings's payout ratio is modest, at just 43% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Asia Pile Holdings paid out more free cash flow than it generated - 112%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Asia Pile Holdings does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

While Asia Pile Holdings's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Asia Pile Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for Asia Pile Holdings

Click here to see how much of its profit Asia Pile Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Asia Pile Holdings earnings per share are up 7.9% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Asia Pile Holdings has lifted its dividend by approximately 15% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Asia Pile Holdings an attractive dividend stock, or better left on the shelf? Asia Pile Holdings has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you're not too concerned about Asia Pile Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 1 warning sign for Asia Pile Holdings that we recommend you consider before investing in the business.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.